The UK's FTSE 100 index closed 1.85% higher on Thursday, posting its biggest daily gain in almost a year, as optimism grew that the war with Iran could end soon. The blue-chip index rose 188 points to 10,364, driven by gains in engineering, catering and banking stocks, while oil producers fell as crude prices weakened.
Brent crude fell below $100 a barrel during the morning, after trading as high as $118 a day earlier. By late trading, it was at $102 a barrel. The drop followed signals from US President Donald Trump that the conflict could conclude within weeks. Trump told reporters: “Now we’re finishing the job. I think in two weeks or maybe a few days longer, we’ll do the job.”
Iranian President Masoud Pezeshkian reportedly said Iran is willing to end the war but only with guarantees to prevent a recurrence of aggression. European and Asian stock markets also rallied, with Japan’s Nikkei jumping 5% and the pan-European Stoxx 600 rising 2%.
Hopes of de-escalation also pushed down the yield on UK government bonds, and City traders bet on fewer interest rate rises this year. However, the Bank of England warned that the Iran war had dealt “a substantial negative supply shock” to the world economy. UK manufacturers reported the biggest jump in cost inflation since Black Wednesday in 1992, and Ryanair warned that jet fuel supplies to Europe could be disrupted from May if the conflict continues.
US manufacturers reported that the war had led to notable disruptions in stock ordering and exacerbated shortages, with data provider S&P Global noting the worst deterioration in vendor times in nearly three-and-a-half years. Factories also passed on higher costs to customers, accelerating input and output price inflation.
